october 31 2017 1 cautionary statements safe harbor
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October 31, 2017 1 Cautionary Statements Safe Harbor Statement - PowerPoint PPT Presentation

Third-Quarter 2017 Earnings Webcast October 31, 2017 1 Cautionary Statements Safe Harbor Statement This presentation contains forward -looking statements, including 2017 revenue and Adjusted EBITDA outlook, as well as statements with


  1. Third-Quarter 2017 Earnings Webcast — October 31, 2017 1

  2. Cautionary Statements Safe Harbor Statement This presentation contains “forward -looking statements,” including 2017 revenue and Adjusted EBITDA outlook, as well as statements with respect to the potential separation of AHS from ServiceMaster and the distribution of AHS shares to ServiceMaster shareholders, that are based on management’s beliefs and assumptions and on information currently available to management. Most forward-looking statements contain words that identify them as forward-looking, such as “anticipates,” “believes,” “continues,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms that relate to future events. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause ServiceMaster’s actual results, performance or achievements to be materially different from any projected results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements represent the beliefs and assumptions of ServiceMaster only as of the date of this presentation and ServiceMaster undertakes no obligation to update or revise publicly any such forward-looking statements, whether as a result of new information, future events or otherwise. As such, ServiceMaster’s future results may vary from any expectations or goals expressed in, or implied by, the forward-looking statements included in this presentation, possibly to a material degree. ServiceMaster cannot assure you that the assumptions made in preparing any of the forward-looking statements will prove accurate or that any long-term financial or operational goals and targets will be realized. For a discussion of some of the important factors that could cause ServiceMaster’s results to differ materially from those expressed in, or implied by, the forward-looking statements included in this presentation, investors should refer to the disclosure contained under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, and our other filings with the SEC. Note to Non-GAAP Financial Measures This presentation contains certain non-GAAP financial measures. Non-GAAP measures should not be considered as an alternative to GAAP financial measures. Non-GAAP measures may not be calculated or comparable to similarly titled measures of other companies. See non-GAAP reconciliations below in this presentation for a reconciliation of these measures to the most directly comparable GAAP financial measures. Adjusted EBITDA, adjusted net income, adjusted earnings per share and free cash flow are not measurements of the company’s financial performance under GAAP and should not be considered as an alternative to net income, net cash provided by operating activities from continuing operations or any other performance or liquidity measure derived in accordance with GAAP. Management uses these non-GAAP financial measures to facilitate operating performance and liquidity comparisons, as applicable, from period to period. We believe these non-GAAP financial measures are useful for investors, analysts and other interested parties as they facilitate company-to-company operating performance and liquidity comparisons, as applicable, by excluding potential differences caused by variations in capital structures, taxation, the age and book depreciation of facilities and equipment, restructuring initiatives and equity-based, long- term incentive plans. 2

  3. Agenda Tony DiLucente Nik Varty Brian Turcotte Chief Financial Officer Chief Executive Officer VP IR & Treasurer CEO: First 100 Days  Terminix Business Transformation  Strategic Growth Priorities  Q3 Financial Summary  Q3 Segment Results  Full-Year 2017 Outlook  3

  4. CEO: First 100 Days  Spent time on site with our business units and in the field • Met with hundreds of employees across all three businesses • Visited Terminix and AHS call centers • Visited Terminix branches and accompanied route technicians on service calls • Observed the ServiceMaster franchisees disaster restoration efforts onsite in Houston in the days following Hurricane Harvey • Conducted operating reviews and deep dives for all businesses • Met with our sell-side analysts and numerous shareholders  Hired Dion Persson to lead the spin management office and overall company business development  Began implementing organizational changes at Terminix to increase customer and channel focus and hired Matt Stevenson as President of Terminix Residential 4

  5. Terminix Business Transformation Build a strong leadership team Drive accountability Empower our technicians to deliver an exceptional customer experience Develop a strong commercial business Implement disciplined, Lean Six Sigma approach Deliver consistently strong revenue & earnings growth 5

  6. Strategic Growth Priorities Execute business transformation Achieve world-class customer service Expand commercial business Increase market penetration through world-class service Extend current product offerings Expand into adjacent markets Franchise Leverage relationships with insurance Services Group companies for disaster restoration Accelerate national accounts growth Extend reach & growth beyond core areas 6

  7. Solid Revenue & EBITDA Growth Q3 2017 Q3 2016 Variance ($ millions, except EPS) Revenue $ 797 $ 758 $ 39 5% Adjusted EBITDA 1 $ 200 $ 192 $ 8 4% Margin 25.1% 25.4% Adjusted Net Income 1 $ 99 $ 81 $ 18 22% Margin 12.5% 10.7% Adjusted EPS 1,2 $ 0.73 $ 0.59 $ 0.14 24% • Continued strong organic revenue and EBITDA growth at AHS • Terminix margin compression, primarily due to the impact of hurricanes and business transformation initiatives • Franchise Services Group delivered solid revenue growth 1 See Appendix for Non-GAAP Reconciliations and Non-GAAP Reconciliation Definitions. 2 Adjusted earnings per share (EPS) is calculated as adjusted net income divided by the diluted share counts of 135.2M shares and 137.1M shares for the third quarter of 2017 and 2016, respectively. 7

  8. Strategic Investments to Drive Long-Term Growth Q3 2017 Q3 2016 Variance ($ millions) Revenue $ 395 $ 396 $ (1) (0)% Gross Profit $ 167 $ 174 $ (7) (4)% Margin 42.4% 43.9% Adjusted EBITDA 1 $ 82 $ 92 $ (10) (11)% Margin 20.9% 23.2% Adjusted EBITDA ($M) $92 1 $82 (3) (1) (3) (2) (2) Q3'16 Revenue Impact of Production Termite Insurance Sales & Q3'17 Conversion Hurricanes Labor Damage Claims Marketing 1 See Appendix for Non-GAAP Reconciliations and Non-GAAP Reconciliation Definitions. 8

  9. Termite Revenue Growth $ millions • • 9

  10. Continued Strong Organic Revenue and EBITDA Growth Q3 2017 Q3 2016 Variance ($ millions) Revenue $ 346 $ 309 $ 37 12% Gross Profit $ 178 $ 152 $ 26 17% Margin 51.3% 49.0% Adjusted EBITDA 1 $ 96 $ 79 $ 17 21% Margin 27.8% 25.7% Adjusted EBITDA ($M) 3 $96 14 $79 (4) (2) Q3'16 Org. Revenue Claims Costs Impact of G&A Sales & Customer Q3'17 Conversion Aquisitions Marketing Service Costs 1 See Appendix for Non-GAAP Reconciliations and Non-GAAP Reconciliation Definitions. 10

  11. Solid Revenue Growth at FSG Q3 2017 Q3 2016 Variance ($ millions) Revenue $ 55 $ 51 $ 4 7% Gross Profit $ 32 $ 31 $ 1 3% Margin 58.2% 60.9% Adjusted EBITDA 1 $ 22 $ 21 $ 1 4% Margin 38.9% 40.2% Adjusted EBITDA ($M) 0.5 $21.5 0.2 0.4 $20.7 (0.3) Q3'16 Revenue Branch Sales & Other Q3'17 Conversion Conversions Marketing 1 See Appendix for Non-GAAP Reconciliations and Non-GAAP Reconciliation Definitions. 11

  12. Consolidated Results $ millions, except per share data Third Quarter 2017 2016 B/(W) Revenue $ 797 $ 758 $ 39 YoY Growth 5% Gross Profit 377 358 19 % of revenue 47.4% 47.2% 0.1 pts Selling and administrative expenses (199) (185) (14) % of revenue 25.0% 24.5% -0.5 pts Amortization expense (7) (8) 2 — 401(k) Plan corrective contribution 4 4 — Fumigation related matters (1) 1 Restructuring charges (21) (8) (12) Interest expense (38) (39) 1 Interest and net investment income 1 1 1 — Loss on extinguishment of debt (3) (3) Income from Continuing Operations before Income Taxes 114 116 (2) Provision for income taxes (34) (46) 12 Income from Continuing Operations 80 70 11 — — — Income from discontinued operations, net of income taxes Net Income $ 80 $ 70 $ 11 Weighted-average diluted common shares outstanding 135.2 137.1 Diluted Earnings Per Share $ 0.59 $ 0.51 $ 0.09 Adjusted Net Income 1 $ 99 $ 81 $ 18 Adjusted EBITDA 1 $ 200 $ 192 $ 8 Adjusted Earnings Per Share 1 $ 0.73 $ 0.59 $ 0.14 1 See Appendix for Non-GAAP Reconciliations and Non-GAAP Reconciliation Definitions. 12

  13. Adjusted EBITDA Bridge to Adjusted Net Income $ millions Third Quarter 2017 B/(W) PY Adjusted EBITDA 1 $ 200 $ 8 Excluded from Adj. EBITDA / Included in Adj. Net Income Stock-based compensation (1) 2 Interest expense (38) 1 Depreciation (19) (3) Provision for income taxes (42) 10 Adjusted Net Income 1 $ 99 $ 18 1 See Appendix for Non-GAAP Reconciliations and Non-GAAP Reconciliation Definitions. 13

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